Aveda is a growing provider of specialized oilfield hauling and rentals in North America. It provides services such as rig moving, heavy hauling, and hot shot services. The company also rents equipment like matting, tanks, and light towers. Aveda recently acquired an oilfield rental business and plans to acquire M&K, expanding its operations. It aims to benefit from organic and acquisition growth opportunities across the continent.
2. DISCLAIMER
The information contained in this corporate presentation (the "Presentation") is based on public information and Aveda Transportation and Energy Services Inc.'s ("Aveda" or the
"Company") information. This Presentation does not constitute, or form a part of, and should not be construed as any offer or invitation to sell, allot or issue, or any solicitation of any offer
to purchase or subscribe for, any securities, nor shall it (or any part of it or anything contained or referred to in it) or the fact of its distribution form the basis of, or be relied upon in
connection with, or act as any inducement in relation to a decision to purchase or subscribe for or to enter into, any contract or commitment whatsoever for securities in any jurisdiction.
The securities of Aveda have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "1933 Act"), or the securities laws of any state.
Additionally, this Presentation is not for release, publication or distribution in, into or from the United States of America.
This Presentation contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of
applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always,
identified by the use of words such as "anticipate", "achieve", "could", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "may", "will",
"project", "should" or similar words, including negatives thereof, suggesting future outcomes. In particular, this Presentation contains forward-looking statements relating to: future growth;
results of operations; operational and financial performance; projected capital expenditures and commitments and the financing thereof; benefits derived from capital expenditures;
expansion opportunities; increases in revenue; equipment delivery and deployment dates; effect of and ability to complete rebranding; geographic allocation of equipment; customer
commitments; ability to establish and maintain a working relationship with third party suppliers; expectations regarding the ability of Aveda to raise capital and to increase its equipment
fleet; benefits associated with financial results; activity levels; business strategy; successful integration of structural changes; restructuring plans; organic growth potential; acquisition
opportunities and benefits and availability of insurance coverage. Aveda has relied on financial information provided to it by M&K Hotshot & Trucking, Inc. and M&K Rig Service, Inc.
(collectively, “M&K”). This information has not yet been formally audited or reviewed. Aveda believes the expectations reflected in the forward-looking statements contained in this
Presentation are reasonable as of the date hereof but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly
relied upon.
Various material factors and assumptions are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking statements. Those material factors
and assumptions are based on information currently available to Aveda, including information obtained from third party industry analysts and other third party sources. In some instances,
material assumptions and material factors are presented elsewhere in this Presentation in connection with the forward-looking statements. Readers are cautioned that the following list of
material factors and assumptions is not exhaustive. Specific material factors and assumptions include, but are not limited to: the performance of Aveda’s businesses and the performance of
the business upon integration of M&K, including current business and economic trends; oil and natural gas commodity prices and production levels; capital expenditure programs and other
expenditures by Aveda and its customers; the ability of Aveda to retain and hire qualified personnel in Canada and the United States; the ability of Aveda to obtain parts, consumables,
equipment, technology, and supplies in a timely manner to carry out its activities; the ability of Aveda to maintain good working relationships with key suppliers; the ability of Aveda to
market its services successfully to existing and new customers; the ability of Aveda to retain customers post-acquisition; the ability of Aveda to obtain timely financing on acceptable terms;
currency exchange and interest rates; risks associated with foreign operations; changes under governmental regulatory regimes and tax, environmental and other laws in Canada and the
United States; and a stable competitive environment.
Forward-looking statements are not a guarantee of future performance and involve a number of risks and uncertainties, some of which are described herein. Such forward-looking
statements necessarily involve known and unknown risks and uncertainties, which may cause Aveda’s actual performance and financial results in future periods to differ materially from any
projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks identified by
Aveda’s annual information form and management discussion and analysis for the year ended December 31, 2012 (the "MD&A") and contained herein under the heading "Risk Factors".
Any forward-looking statements are made as of the date hereof and, except as required by law, Aveda assumes no obligation to publicly update or revise such statements to reflect new
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information, subsequent or otherwise.
3. DISCLAIMER (CONT’D)
Future-Oriented Financial Information
This Presentation also contains future-oriented financial information and financial outlook information (collectively, "FOFI") about prospective results of operations, future net revenue,
share capital, cash flows, and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs including
the risks set out in the Company's MD&A and annual information form for the year ended December 31, 2012. FOFI contained in this Presentation was made as of the date of this
Presentation and was provided for the purpose of providing information about management's current expectations and plans relating to the future. The Company disclaims any intention or
obligation to update or revise any forward looking statements or FOFI contained in this Presentation, whether as a result of new information, future events or otherwise, unless required
pursuant to applicable securities law. Readers are cautioned that the forward looking statements and FOFI contained in this Presentation should not be used for purposes other than for
which it is disclosed herein. The forward looking statements and FOFI contained in this Presentation are expressly qualified by this cautionary statement.
The forward-looking statements contained in this Presentation are made as of the date on the front page and the Company assumes no obligation to update publicly or to revise any of the
included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. Certain information
contained herein is based on, or derived from, information provided by independent third-party sources. The Company believes that such information is accurate and that the sources from
which it has been obtained are reliable. The Company cannot guarantee the accuracy of such information, however, and has not independently verified the assumptions on which such
information is based. The Company does not assume any responsibility for the accuracy or completeness of such information.
Non-International Financial Reporting Standards Measures
This Presentation contains the terms EBITDA (earnings before interest, taxes, depreciation and amortization) and working capital which are defined in the MD&A. These measures are
commonly utilized in the oilfield services industry and are considered informative for management and stakeholders. Neither working capital nor EBITDA have a standardized meaning
prescribed by international financial reporting standards ("IFRS") and therefore Aveda's calculations may not be comparable with the calculation of similar measures for other entities.
Management uses EBITDA to analyze the operating performance of businesses. EBITDA as presented is not intended to represent cash provided by operating activities, net earnings or other
measures of financial performance calculated in accordance with IFRS.
This Presentation does not constitute a recommendation regarding the securities of Aveda. No reliance may be placed for any purpose whatsoever on the completeness, accuracy or fairness
of the information or opinions contained in this Presentation nor is any responsibility or liability accepted for any errors or misstatements in, or omissions from, this Presentation or any
direct or consequential loss (howsoever arising) from any use of, or reliance on, this Presentation or otherwise in connection with it. No undertaking, representation, warranty or other
assurance, express or implied, is made or given by or on behalf of Aveda, or any of its respective directors, officers, partners, employees, agents, affiliates or advisers or any other person as
to the accuracy, completeness or fairness of the information or opinions contained in this Presentation and no responsibility or liability is accepted by any of them for any such information
or opinions.
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4. COMPANY OVERVIEW
Aveda Transportation and Energy Services (“Aveda” or the “Company”) is a growing provider of specialized oilfield
hauling and rentals to the US and Western Canadian oil and gas industry
Aveda was founded in 1994, went public in 2006 and was recapitalized in 2011
The Company is well positioned to take advantage of attractive organic and acquisition growth opportunities
throughout North America
Multiple cross-over business opportunities achieved through oilfield hauling and rental business units
Oilfield Hauling
Rig moving
Heavy hauling
Hot shot services
Oilfield Rentals
Matting
Tanks
Light towers
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5. MANAGEMENT AND BOARD OF DIRECTORS
Management
David Werklund – Executive Chairman
Has been the Chairman of Aveda since 2006 and served as Interim
President and CEO of Aveda from September 2011 to November
2012. Appointed as Executive Chairman in November 2012
Began career in 1965 at Shell Canada as a Production Operator
Founder and Chairman of the Board of Directors of CCS
Corporation (now Tervita Corporation)
Co-Founder of Concord Well Servicing
Founder & Executive Chairman of Werklund Capital Corporation
The 2005 Ernst & Young's Canadian Entrepreneur of the Year
The 2013 Calgary Business Hall of Fame Laureate
Kevin Roycraft - President and CEO
Joined Aveda in November 2012
More than 20 year of Transportation Industry Experience
Former Vice-President of Operations for Liquid Transport Corp.
(one of North America’s largest bulk chemical and oil
transportation company)
Bharat Mahajan – Vice-President, Finance & CFO
Joined Aveda in October 2011
Held several positions with Magna International overseeing
various international growth initiatives
Former CFO of several oilfield service companies, including
Wellpoint Systems Inc. and Norex Exploration Services Inc.
Board Members
Stefan Erasmus
President of Werklund Capital Corporation
Director of several private companies and charitable organizations
Former Managing Director of Resources Global Professionals
Doug McCartney
Partner of Burstall Winger LLP
Practices in the areas of securities and corporate finance and
corporate and commercial law
Director or officer of several private companies
Paul Shelley
President of Convinco Financial Ltd.
Former Senior Vice President, Corporate Development at Kos Corp.
Investments Ltd.
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6. MANAGEMENT TRACK RECORD
David Werklund founded CCS Corporation (now Tervita Corporation) in 1984 and built it largely through the
consolidation of several oilfield services companies and organic growth
CCS privatized in 2007 for approximately C$3.5 billion (the largest Trust privatization in Canadian history)
Historical Shareholder Returns
CAGR
24%
CAGR
2490%
Total Return
CCS
Source: FactSet
Total Return
CCS
24%
CCS Selected Historical Acquisitions
2490%
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7. CAPITALIZATION SNAPSHOT
Capitalization
Share price (January 2, 2014)
Shares Outstanding Basic (mm)(2)
Outstanding Stock Options (mm)(2)
Shares Outstanding Fully Diluted (mm)(2)
FD Market Capitalization ($mm)
Balance Sheet Summary(1)(4)
$5.50
Operating Line Available ($mm)(4)
$26.3
12.0
Property and Equipment ($mm)(4)
$48.6
Working Capital ($mm) (1)
$10.1
1.0
13.0
Total Assets/Tangible Assets ($mm)(4)
$71.5/$67.4
$71.5
Net Debt ($mm)
Shareholder Summary(2)
Loans and Borrowings(4)
$22.8
Cash(1)(3)
($3.4)
Werklund Capital Corp
Total Net Debt ($mm)
$19.4
Other Insiders
2.0%
Enterprise Value ($mm)
$90.9
Total Insiders
56.9%
54.9%
(1) At September 30, 2013
(2) At December 31, 2013
(3) Includes potential cash from exercise of all options of $2.7 million
(4) Balance sheet value as at September 30, 2013 adjusted for effect of oilfield rental acquisition as per slide 15 (“Belair Acquisition”)
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8. CAPITALIZATION SNAPSHOT WITH PLANNED
M&K ACQUISITION
Capitalization
Share price (January 2, 2014)
Shares Outstanding Basic (mm)(4)
Outstanding Stock Options (mm)(2)
Shares Outstanding Fully Diluted (mm)(4)
FD Market Capitalization ($mm)(4)
Balance Sheet Summary
$5.50
Operating Line Available ($mm)(6)
$37.1
19.9
Property and Equipment ($mm)(7)
$71.4
Working Capital ($mm) (1)
$10.1
1.0
20.9
Total Assets/Tangible Assets ($mm)(8)
$113.9/$96.6
$115.0
Shareholder Summary(4)(9)
Loans and Borrowings(5)
$37.9
Cash(1)(3)
($3.4)
Werklund Capital Corp.
Total Net Debt ($mm)
$34.5
Other Insiders
1.2%
$149.5
Total Insiders
34.6%
Enterprise Value ($mm)
33.4%
(1) At September 30, 2013.
(2) At December 31, 2013.
(3) Includes potential cash from exercise of all options of $2.7 million.
(4) Amount includes 12.0 million common shares outstanding at December 31, 2013, 6.4 million subscription receipts convertible to common shares of the Company upon completion of the planned acquisition
described in detail on slide 14 (“M&K Acquisition”), and 1.5 million common shares planned to be issued to the sellers in connection with the planned M&K Acquisition.
(5) Total Loans and Borrowings as at September 30, 2013 of $24.0 million reduced by conversion of $4.7 million debenture into equity on December 31, 2013, additional loan for planned M&K Acquisition of $15.1
million assuming final purchase price of US$40.0 million and oilfield rental acquisition as per slide 15 (“Belair Acquisition”) of $3.5 million. Changes in Loans and Borrowings balance not adjusted for impact of
regular operations.
(6) Credit facility conditionally increased to $75 million in connection with planned closing of the M&K Acquisition, less adjusted loans and borrowings of $37.9 million.
(7) Total Property and Equipment as at September 30, 2013 of $45.5 million, adjusted for fair market value of property and equipment to be acquired in connection with the planned M&K Acquisition of $22.8 million
(US$ 21.5 million using USD:CAD FX rate of 1.06), and property and equipment acquired in Belair Acquisition $3.1 million.
(8) Total Assets as at September 30, 2013 of $67.5 million, adjusted for increase in assets of Belair Acquisition of $4.0 million and planned M&K Acquisition of $42.4 million (assumed final purchase price of US$40
million using USD:CAD FX rate of 1.06). Total Tangible Assets as at September 30, 2013 of $64.3 million, adjusted for tangible assets acquired in Belair Acquisition of $3.1 million (Property and Equipment - $3.1
million) and planned M&K Acquisition of $29.2 million (Property and Equipment – US$22.0 million and Working Capital of US$5.5 million using USD:CAD FX rate of 1.06).
(9) Assumes conversion of subscription receipts into common shares of the Company upon completion of planned M&K Acquisition.
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9. OILFIELD HAULING MARKET
Approximately 2,190 Active Rigs in North America(1)
Aveda has a targeted growth plan that
is focused on targeting oil/liquid rich
weighted basins across North America
Based on a recent market analysis,
Aveda estimates each rig moves
approximately 1.4 times per month or
17 times per year (approx. 37,230
moves per year based on early January
2014 rig count)
Aveda’s reputation, customer
relationships and quality service results
in high utilization of its transportation
equipment
Active Region Prior to 2012
2012 Organic Expansion
2013 Organic Expansion
Planned M&K Acquisition
Expansion Opportunity
North American Active
Land Rig Count(1)
WCSB
2013
1,948
2012
2,308
523
185
Williston/
Bakken
Utica
Northern Texas/
Oklahoma
232
468
Permian
34
38
85
Marcellus
Barnett
228
Eagle Ford
Oil Focused
NGL Focused
(1) ) Active rigs on or about January 3 in relevant year; as per Baker Hughes & CAODC
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10. NORTH AMERICAN OPERATIONS
Recently announced planned acquisition of
oilfield hauling and equipment rentals
operations in Williston, ND (“M&K
Acquisition”)
Newly acquired oilfield rentals operation in
Edson, AB (“Belair Acquisition”)
Thirteen offices located in the heart
of the key North American resource plays
Significant expansion opportunities especially
in U.S. markets
Flexible workforce can be transferred cross
border to high activity areas
Experienced team of more than 280
employees, with approximately additional 90
employees to be added in connection with
the planned M&K Acquisition
Fixed Asset Allocation
Geographic Locations
Current
Aveda
M&K
Acquisition
SLAVE LAKE
WILLISTON
EDSON
LEDUC
BUCKHANNON
SYLVAN LAKE
CALGARY
MIDLAND
WILLIAMSPORT
36%
49%
(1)
(2)
64%
PLEASANTON
MINERAL WELLS
51%
US
(1)
(2)
Canada
Based on total equipment Net Book Value at September 30, 2013
Based on total equipment Net Book Value at September 30, 2013 and
adjusted for the effect of Belair Acquisition and planned M&K
Acquisition
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11. OILFIELD HAULING OVERVIEW
Modern, well maintained current fleet of 569 pieces of
equipment (169 power units)
Planned M&K Acquisition to add 170 pieces of equipment
(85 power units)
Current employees of 282 employees (163 operators)
Planned M&K Acquisition expected add approximately 90
employees (56 operators)
Fragmented industry makes for attractive consolidation
opportunities
Primary competitors include TransForce, Mullen, Flint and
regional specialty haulers
Blue Chip Customer Base
Equipment Composition in Hauling Fleet
Trailer
Miscellaneous
Tractor
Picker/Loader
Bed Truck
Cranes
0
50
100
Current Aveda
150
200
250
300
Planned M&K Acquisition
350
400
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12. OILFIELD HAULING CASE STUDY
Aveda has outperformed its competitors as a result of:
Newer, more specialized equipment
Experienced personnel
Planning and communications
Ability to meet industry demands for heavier equipment and larger loads
40 mile rig move – Marcellus Shale (1)
Competitor
Aveda
11 days
4 days
The Result:
11% price premium for Aveda
64% reduction in rig downtime for customer
(1) 1,250 hp, jackknife triple rig, ~ 70 loads
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13. OILFIELD RENTALS OVERVIEW
Planned M&K Acquisition anticipates to enable the
expansion of oilfield rentals operations in the US
(Williston, ND)
Modern, well maintained equipment with 1,263 pieces
in the rental fleet after Belair Acquisition and planned
M&K Acquisition
Plan to build critical mass through the acquisition of
competitors with similar or complementary equipment
Recent Belair acquisition of complementary equipment
in Edson, AB
Typical acquisition multiples identified at 3.0x to 3.5x
EBITDA
Blue Chip Customer Base
Equipment Composition in Rental Fleet
Tanks
Rig Mats
Miscellaneous
Racks
Light Towers
Shale Bins
Well-site Shacks/Trailers
0
Aveda Pre-acquisition
50
100
150
200
Belair Acquisition
250
300
350
400
Planned M&K Acquisition
450
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14. PLANNED OILFIELD HAULING SERVICES AND
EQUIPMENT RENTALS ACQUISITION IN NORTH
DAKOTA
Planned acquisition of the assets of M&K Hotshot & Trucking, Inc. and M&K Rig
Service, Inc. (collectively “M&K”) in Williston, North Dakota
Initial purchase price expected to be between US$38.0 million and US$42.0 million or 3.18 times 2013
EBITDA (expected to fall in the range of US$12.0 million and US$13.0 million). Initial purchase price
includes US$5.0 million equity at $3.60/share and remainder in cash
Estimated US$9.0 million in additional consideration on an earnout basis over three years if certain EBITDA
levels achieved
Strong track record of revenue and EBITDA growth. Between 2010 and 2012 revenue increased from
US$10.6 million to US$33.5 million and grew EBITDA from US$3.1 million to US$12.4 million (historic
financial data unaudited)
Anticipated to potentially double the size of the Company on an EBITDA basis. Attractive acquisition
multiple, with excellent revenue growth potential and strong profitability including significant recurring
customer base
170 pieces of high quality oilfield hauling equipment including 79 trailers, 15 conventional tractors, 14
winch tractors, and 3 cranes and 395 pieces of rental equipment with total fair market value of US$22.0
million
Immediate exposure to the Williston/Bakken Formation, one of the largest oilfields in the US
Create synergy by improving utilization of existing oilfield hauling equipment
Regional expertise, sellers intend to remain with the Company
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15. OILFIELD RENTALS ACQUISITION
Lon Dan Enterprises Ltd. DBA Belair Rentals in Edson, Alberta
$4.0 million initial purchase price ($0.5 million equity at $3.63/share and $3.5 million cash)
Additional $0.5 to $1.5 million cash consideration contingent on achieving certain EBITDA target
3.06 – 3.21 times target EBITDA multiple based on achieving earnout
Expected annual EBITDA of $1.4 – 1.8 million
Added more than 140 pieces of higher margin contributing equipment that are complementary to existing
equipment base (well-site shacks, light towers, matting)
Expanded geographical footprint to better serve our customers
Create synergy by improving utilization of existing rental equipment
15
16. GROWTH STRATEGY
Capital Expenditure Program
Completed capital expenditure of $25 million in 2012 and $6 million in 2013 including
addition of 2 cranes and implementation of transportation management systems
Organic Growth Initiatives
Existing Customers
Rig moving and ancillary equipment (e.g. tanks, trailers, cranes, etc.)
Implement transportation management systems (e.g. GPS, satellite communications)
Expansion into New Areas – new satellite branch in Buckhannon, WV
Target high activity resource plays focused on oil and NGL exploration
Growth Through Acquisitions
Acquire complementary fleets in both new and existing geographies
Typical acquisition multiples of 3.0x to 3.5x EBITDA
Evaluating potential acquisitions of various sizes in high activity regions
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17. FINANCIAL PERFORMANCE: REVENUE
• Reported 14 consecutive quarters of record revenue growth as compared to the same period of the prior year:
– 11% overall revenue growth in the first nine months of 2013 vs. 2012 despite year-over-year average rig
count decline of approximately 7% in the areas the Company operates (1)
– 40% revenue growth in the U.S. in the first nine months of 2013 vs. 2012
Annual Revenue ($MM)
Revenue by Geography
$100.0
$75.0
$50.0
$83.3
$72.2
$39.8
$33.9
68%
2013
$25.0
$0.0
2009
2010
2011
2012
32%
First Nine Months Revenue ($MM)
$66.9
$70.0
$60.0
Canada
United States
$60.3
46%
2012
54%
$50.0
$40.0
First Nine Months 2012
First Nine Months 2013
(1) As per Baker Hughes & CAODC
Canada
United States
Growing
exposure to
the resilient
U.S. market
18. FINANCIAL PERFORMANCE: EBITDA
• First nine months of 2013 EBITDA of $12.0
million, an increase of $4.8 million compared to
2012, reflecting:
Annual EBITDA ($MM)
$11.3
$12.0
– Higher utilization across North America
– Premium pricing in key resource plays
– Operational efficiencies resulting in
increased margins
$9.8
$8.0
$4.2
$4.0
$2.1
$0.0
2009
2010
2011
2012
First Nine Months EBITDA ($MM)
$15.0
$12.0
$10.0
$7.2
$5.0
$0.0
First Nine Months 2012
First Nine Months 2013
19. RECENT ACHIEVEMENTS SUMMARY
Signed asset purchase agreement to acquire oilfield hauling and equipment rentals
assets in Williston, ND (see slide 12 for more details)
Completed $23.0(1) million subscription receipt bought deal private placement (the
“Offering”)
Increased senior credit facility from $50.0 million to $75.0 million (subject to
planned closing of M&K Acquisition), in the process reduced interest rate by 50
bps
Converted $4.7 million convertible debenture into equity
Acquired complimentary oilfield rentals assets in Edson, AB
Opened new satellite branch in Buckhannon, WV to serve the Utica Basin
1) The net proceeds from the Offering will be deposited in escrow pending satisfaction of certain conditions, including the condition that all conditions
precedent to the completion of the planned M&K Acquisition have been satisfied. If the escrow release conditions are not satisfied on or prior to March 7,
2014 or certain other termination events occur, the proceeds will be returned to the subscribers. Upon completion of the Offering, the Company intends to
use the net proceeds of the Offering to fund a portion of the purchase price of the planned M&K Acquisition and for general corporate purposes.
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20. INVESTMENT HIGHLIGHTS
Proven management team with a history of value creation
Solid industry fundamentals supported by continued strong oil prices
Strong balance sheet and cash flow generation
Significant growth opportunities across emerging oil-weighted resource plays
Organic growth
Acquisitions
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21. CONTACT
Bharat Mahajan
Chief Financial Officer
Aveda Transportation and Energy Services
Suite 300, 435 – 4th Avenue SW
Calgary, AB
T2P 3A8
(403) 264-5769
bharat.mahajan@avedaenergy.com
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